Picture your
life as a five-step stairway, with you standing at the top
and Fulfillment waiting for you at the bottom. Complete this
picture by placing a large, empty bucket on each of the five
steps and labeling the buckets from top to bottom: Survival,
Financial Stability, Quality of Life, Financial Security,
Financial Independence.
Your objective is to fill
each bucket with dollars as you progress down the stairway,
so that when one bucket overflows, it begins to fill the next
bucket.
The Survival bucket is how
you pay for your basic needs of food and shelter. Once you've
taken care of these, any extra money flows into the second
bucket, which is Financial Stability. Financial stability
is the ability to keep solvent in the event of sudden, unforeseen
changes and emergencies in your life — insurance against
catastrophic loss.
To be financially stable,
you must have an emergency fund in a savings account equal
to a minimum of three months' income, and preferably six months'
income. You also must have adequate permanent and transferable
medical insurance that remains in force, regardless of your
employmentstatus, as well as life insurance, including some
whole life, in addition to term, that accumulates cash value
and has a level premium.
Another critical component
of financial stability is non-cancelable, individual permanent
disability income insurance, equal to at least 70 percent
of your monthly pay, but preferably 100 percent. One of the
greatest financial blunders most people make is to forget
that the possibility of loss of income resulting from an injury
or illness is much greater than that of loss of life. Not
only are you without income when you are sick or injured,
you also do need to be cared for during that period, and the
expenses continue even though you're not able to work.
When bucket two is filled
with contingency dollars for your financial stability, you
can sit down with your inner circle and determine what standard
of living will give you the quality of life you want: your
home, family, education, recreation, possessions, etc. These
considerations should be budgeted with a monthly amount of
savings, however small.
If you can fill your Quality
of Life bucket, a little extra discretionary income will trickle
over the lip and fall into bucket four. This is the Financial
Security bucket. Financial security is defined as that amount
of assets that will give you the amount of after-tax income
you need to maintainthe standard of living necessary to have
the quality of life you want, at some predetermined point
in the future, without having to depend upon day-to-day employment.
Less than 10 percent of Americans
ever fill this bucket. Your goal is to be in this 10 percent.
It is not based on salary. Many individuals in the top income
brackets never reach financial security. Many middle-income
Americans do. To get in the top 10 percent, you need to put
10 percent of your spendable income into an appreciating investment
fund every month, just like a mortgage payment.
The fifth and final bucket
is Financial Independence. This is achieved when you beat
the target date you set for retirement. The object of creating
personal assets is to be financially independent of having
to work, while you still have your health and are still young
enough to enjoy those assets. Many individuals set their financial
security target date at age 65. Using compound interest over
time, you can beat your target date and set yourself free.
See your life as a stairway
to fulfillment. Put your dollars in the right buckets, in
the right order. You'll be amazed at the way cash flows from
bucket to bucket, like a river down a mountain.
| Authors Details: Denis Waitley - Unknown
Web Site |
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